THE INHERITANCE: BUDGET

The Next Fiscal Showdowns That Could Ruin Us

Both parties fantasize about a grand bargain. In the real world, they’ll be lucky to avoid a fiscal catastrophe.

By Caren Bohan and Billy House

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(iStock)

Two weeks before his reelection last year, President Obama set a goal of achieving a grand bargain on the budget early in his second term. “We’re going to be in a position where, I believe, in the first six months we are going to solve that piece of business,” he told The Des Moines Register. Marginal tax-rate hikes, entitlement cuts, and tax reform would set the country on a healthier path. They could also end the interminable fiscal squabbles and free up some political oxygen for priorities such as immigration reform.

It was a nice idea. Then the fiscal-cliff brawl of late 2012 brought everyone back to earth. After the collapse of talks with House Speaker John Boehner over a package that could have raised $1.2 trillion or more in tax revenue and curbed entitlement spending, Obama had to settle for just $600 billion in revenue and a series of winter showdowns over spending.

Somehow, the president is still touting his hope for a grand bargain. But even restoring stability will require surmounting immense hurdles. The obstacles range from a broken federal budget process (which has made it harder for the sides to negotiate), to the fallout from a fiscal-cliff deal that limits Democratic options on taxes, to the steadily rising demographic pressures that could cause entitlements such as Medicare to crowd out other budget programs. For those committed to reforming America’s fiscal system—let alone devising a grand bargain—the next two years will be exceedingly difficult. Here’s why.

A BROKEN PROCESS

If the budget process worked the way it’s supposed to, Obama and his aides would have spent much of December putting the finishing touches on a fiscal 2014 budget to be sent to Congress in early February. Then, as spelled out in the Congressional Budget Act of 1974, the House and Senate would settle on a framework—or “resolution”—for spending and taxes, paving the way for Congress to take up the 13 annual appropriations bills due on Oct. 1.

Instead, the White House spent last month frantically negotiating with congressional leaders to avert a cataclysm. The two sides scraped through by deferring tough decisions and setting up more showdowns. Now, when Congress should be preparing its budget resolution and discussing how to fund the government, it will be debating basic questions that should have been resolved years ago, starting with: What is the role of government?

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This was not a fluke. The 2012 fiscal-cliff clash was the culmination of a years-long decline in stable budget-building; the process has simply reached a new low. The House and Senate haven’t agreed on a full budget resolution since 2009, Obama’s first year in office, when Democrats controlled both chambers.

Months of deliberations on tax and spending policies have been replaced by eleventh-hour deals like the cliff, stopgap funding bills, and omnibus packages passed under the threat of a government shutdown. Congress has adopted at least one budget resolution in 31 of the 38 years since 1975, when the modern congressional budget process began, according to the Congressional Research Service. The seven failures have all occurred since 1998. And the House and Senate haven’t jointly passed a full year’s blueprint for taxes and spending since 2009. (Even when Congress has passed a budget, it never has been good at sticking to a timetable. It has met its spring deadline for the resolution only six times since 1975, most recently in 2003.) A return to regular order is unlikely anytime soon. The hyper-partisanship at the root of the disarray shows no sign of abating.

Everyone seems to agree that this is “no way to run government,” as Senate Minority Leader Mitch McConnell, R-Ky., put it in an ABC interview this month. Rep. Chris Van Hollen of Maryland, the ranking Democrat on the House Budget Committee, tells National Journal, “If we could have a common budget, come out of a budget conference process, it would mean we’ve resolved a framework for a lot of these issues.” But that hasn’t worked. Now, when Obama unveils his spending blueprint for 2014, it will serve more as a negotiating position for the coming standoffs than as a framework for appropriations. “The budget will represent the way the president would write the budget if he got to write it,” Van Hollen says.

The GOP will try something similar, sources say. At an issues retreat concluding Friday in Williamsburg, Va., Boehner was to discuss with rank-and-file House Republicans how they should advance another budget this spring. Republicans will use that to pressure Senate Democrats to pass their own spending plan. Budget proposals are now used as political messaging tools, which of course hinders the process of actually funding the government, says Gordon Gray, a budget expert at the American Action Forum and a former aide to Sen. Rob Portman, R-Ohio. “If they’d agree on actual budget resolutions in both chambers, they’d be setting a lot of the conditions for getting these issues resolved well in advance of their expirations,” he says.